How to double Digg's revenue

Silicon Alley Insider recently issued a challenge:

Despite strong traffic and passionate users, Digg's revenues blow. During the first three quarters of 2008, Digg saw about $6.4 million on 30 million monthly uniques and lost $2 million. Yuck.

Today we're launching the Fix Digg's Miserable Business Contest.

The winning submission will ideally include steps to implement the plan, revenue projections based on real numbers, helpful visuals (like a deck) and clean prose. We'll judge submissions based on their creativity, clarity and plausibility.

The prize? ... We'll personally pass the winners' plan and resume to our friends at Digg: CEO Jay Adelson and founder Kevin Rose.

Contest? I love contests! (I also love proposing really smart revenue models.)

Anyway, today was the deadline to submit, so I took an hour and I threw up some ideas I've been thinking about in an intentionally cheesy-looking Power Point (see above or here).

Lo and behold, my deck was one of the top five selected by Alley Insider today.

Now, I don't generally try to sound too headstrong, but my idea is really the only reasonable one up there; so, when you vote (click through to vote), do Digg a favor and vote for my deck (#1).

But in all seriousness, my idea for Digg -- to sell in-line "Sponsored Article" listings on a CPC or eCPM basis -- is a really good one: not because it's my idea (I refer to it as the "Techmeme Model," so clearly I don't think it's my idea) or because I don't think Digg hasn't thought of it (how could they not), but because I think it's the right thing to do, not only for Digg their bottom line, but also for Digg's users!

Going back aways, my friend Charlie posted a idea for a service to "Grease This Post." In the article, he wrote:

How great would it be if, right next to the publish button, there was another button that said, "Do you want to invest $10 in driving relevant traffic to this post?"  The money could be used to not only do search placement, but sponsored placement as "Suggested sponsored links" in front of bloggers talking about the same things.

Amen, Charlie.

If Digg allowed brands, publishers, and indy bloggers to "grease" their posts and press releases, it would not only command super-high eCPMs for Digg, but also provide a new tool for Digg's users.

And Digg doesn't have to allianate their users in the process!

Back at FOWA Miami 2008, Matt Mullenweg of Wordpress explained that Wordpress does put advertising on its publishers' pages, but because they only target infrequent visitors, most users never see them.

With Digg, one could assume that only 10% of pageviews come from registered users, and only 1% from hardcore power users (90/10/1 is a common ratio for User Generated Content (UCG) sites like Digg).

What's special about Digg, is that while that fat 90% of visitors isn't necessarily registered, they are there to discover new content.

This puts Digg is a great position to power paid discovery for publishers and brands and reach a huge majority of users (visitors) without alienating the notoriously Digg-is-a-temple set of power users.

Anyway, I think it's a great model. To start, Digg would have to build a simple tool for folks to create and target ads with. It should be self-service to begin with and Digg should experiment with CPM and CPC models to see what works best for the advertisers.